* FTSE closes up 0.3 pct at 6,690.17 points
* But index has biggest weekly fall since early April
* Shire surges 5.9 pct on hopes of talks with AbbVie
* Merger activity also lifts Imperial Tobacco and BAT
By Sudip Kar-Gupta
LONDON, July 11 (Reuters) - Britain's top equity index rose on Friday, propped up by gains in tobacco shares and healthcare stock Shire, breaking a four-day losing streak that saw it suffer its biggest weekly fall in three months.
The blue-chip FTSE 100 index closed up by 0.3 percent, or 17.80 points, at 6,690.17 points.
Shire surged 5.9 percent on new signs that the company may have to engage with rival AbbVie to discuss the U.S drugmaker's $51 billion takeover bid for Shire.
Merger activity also lifted Imperial Tobacco and British American Tobacco, after Imperial said it was in talks to buy some brands from Reynolds and Lorillard as part of a merger plan confirmed by the two U.S. companies.
Over the course of the week, the FTSE fell by 2.6 percent, its biggest weekly drop since April.
Financial markets have been unsettled this week by problems with Portuguese bank Banco Espirito Santo, and IPR Capital director Steven Mayne backed selling or "shorting" any advances by the FTSE 100.
"Political and economic unrest could quickly move the market lower, so I would look to short any rallies," said Mayne.
The FTSE's retreat since the start of July has pushed it down from peaks reached in late May, which took the index close to record highs.
Some traders expect it to remain stuck in its recent trading range, between a high just below 6,900 points and lows around 6,600, through the next month.
"I still think that 6,900 is achievable by the year end, but for the moment, it's a bit risk-off," said Novum Securities' technical strategist Adrian Slack. (Additional reporting by Tricia Wright; Editing by Larry King and David Holmes)